Mozambique

• Author: Jean A.P. Clément/Shanaka J. Peiris
• Pages: 6-7

Page 6

Mozambique's growth takeoff since the end of its civil war has been impressive and comparable to that of several fastgrowing Asian economies, particularly the ASEAN-4,¹ India, and Vietnam. Its commitment to the stabilization effort, success in implementing first-generation structural reforms, and substantial donor assistance helped make this growth possible. The support of the international community, including the International Monetary Fund and World Bank, also helped Mozambique sustain its reform momentum and expand such basic services as primary education and health. Political stability and the consolidation of democracy in three general and presidential elections, which yielded a fairly unified government with a firm commitment to stability and growth, have helped underpin growth.

However, now that the post-stabilization rebound has largely run its course and first-generation reforms have been completed, more must be done to sustain Mozambique's growth takeoff and further ease poverty. Mozambique has relatively sound political institutions, a favorable geography, and low income inequality-conditions common to many countries that have seen sustained growth takeoffs.

What, then, may be the major constraints to sustaining Mozambique's takeoff in the years to come? According to a benchmarking exercise comparing the characteristics of fast-growing Asian and post-stabilization sub-Saharan Africa countries with those of Mozambique,² the country must make more progress in enhancing all levels of voice and participation at the institutional level, given the relatively high degree of societal fractionalization and regional disparities, so that more areas and groups benefit from growth. Mozambique's economic institutions- particularly in terms of regulatory quality and the rule of law-are also relatively weak, though improving. Regarding the rule of law, it is possible to sustain growth while building institutions over the longer term, especially if efforts are made to invest in human capital and further integrate Mozambique into the global economy.

At the macroeconomic level, the consolidation of overall stability and a second wave of reforms would likely help Mozambique accumulate more capital and enhance its productivity growth. Inflation should be firmly anchored to single-digit levels, and real exchange rate overvaluations should be avoided. In this regard, it would be important for Mozambique to pursue a prudent macroeconomic...